Assume a continuously compounding dollar interest rate of 5%. If you long a 1-year forward contract on a security with a delivery price K of $55, (a) the security to the future (except interest cost). What should be the current forward price F on the security with 1-year maturity? If the current spot price is $50, there is not other costs or benefits in carrying (b) position in the 1-year forward with a delivery price of $55? Based on your calculated forward price, what is the current value of your long

Question
Assume a continuously compounding dollar interest rate of 5%. If you long a 1-year
forward contract on a security with a delivery price K of $55,
(a)
the security to the future (except interest cost). What should be the current forward price
F on the security with 1-year maturity?
If the current spot price is $50, there is not other costs or benefits in carrying
(b)
position in the 1-year forward with a delivery price of $55?
Based on your calculated forward price, what is the current value of your long
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Transcribed Image Text

Assume a continuously compounding dollar interest rate of 5%. If you long a 1-year forward contract on a security with a delivery price K of $55, (a) the security to the future (except interest cost). What should be the current forward price F on the security with 1-year maturity? If the current spot price is $50, there is not other costs or benefits in carrying (b) position in the 1-year forward with a delivery price of $55? Based on your calculated forward price, what is the current value of your long